Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview
WNRL is a fee-based growth-oriented, Delaware master limited partnership formed
by Western Refining Logistics GP, LLC ("WRGP"), our general partner which holds
all of the non­economic general partner interests in WNRL and is owned 100% by
Western Refining, Inc. ("Western"). WNRL was formed to own, operate, develop and
acquire terminals, storage tanks, pipelines and other related businesses. WNRL
filed a registration statement on Form S-1 related to our initial public
offering (the "Offering") with the SEC that was declared effective on October 9,
2013. On October 10, 2013, WNRL's common units began trading on the New York
Stock Exchange under the symbol "WNRL". On October 16, 2013, WNRL completed the
Offering of 15,812,500 common units representing limited partner interests.
We generate substantially all of our revenues under fee-based agreements with
Western. These contracts should generate stable and predictable cash flows and
limit our direct exposure to commodity price fluctuations to the loss allowance
provisions in such commercial agreements. As a result of our fee-based
arrangements with Western, we generally do not have exposure to variability in
the prices of the hydrocarbons and other products we handle, although these
risks indirectly influence our activities and results of operations over the
long term.
The financial results presented and related discussion and analysis include, for
periods prior to October 16, 2013, the consolidated financial position, results
of operations and cash flow information of Western Refining Logistics, LP
Predecessor, our predecessor for accounting purposes. The Predecessor did not
historically operate its assets for the purpose of generating revenues
independent of other Western businesses that it supports. Effective October 16,
2013, concurrent with the closing of the Offering, we entered into fee-based
commercial and service agreements with Western under which we operate pipeline,
terminal, storage and transportation assets for the purpose of generating
fee-based revenues.
Major Influences on Results of Operations
Supply and Demand for Crude Oil and Refined Products. Our terminal throughput
volumes depend primarily on the volume of refined and other products produced at
Western's refineries that, in turn, are ultimately dependent on Western's
ability to operate their refineries at planned rates. Our throughput volumes
could be impacted by Western's operational performance and also by the refining
margin environment.
Organic Growth. We expect our revenues and distributable cash flow to grow as a
result of increased volumes through our existing assets and through the
expansion of our existing assets. In connection with the Offering, we have
retained cash on the balance sheet to fund projects in order to achieve this
desired growth. This growth is somewhat dependent on the expected crude oil
production growth in the areas in which we operate. Our results will be impacted
by our ability to develop organic growth projects as well as actual crude oil
production growth in the future.
Acquisition Opportunities. We may acquire additional logistics assets and other
related businesses from Western, its affiliates or third parties. Under our
omnibus agreement with Western, subject to certain exceptions, we have rights of
first offer on certain logistics assets owned by Western to the extent Western
decides to sell, transfer or otherwise dispose of any of those assets. We also
have rights of first offer to acquire additional logistics assets in the Permian
Basin or the Four Corners area that Western may construct or acquire in the
future.
Identifying and executing acquisitions is a key part of our strategy, and we
plan to pursue strategic asset acquisitions from third parties to the extent
such acquisitions complement our or Western's existing asset base or provide
attractive potential returns in new areas within our geographic footprint. We
believe that we are well-positioned to acquire logistics assets from Western and
third parties as opportunities arise. If we are unable to identify economically
acceptable acquisitions, our future growth may be limited. Additionally, assets
that we acquire may potentially reduce, rather than increase, our cash available
for distribution. These acquisitions could also affect the comparability of our
results from period to period. We expect to fund future growth capital
expenditures primarily from a combination of cash-on-hand, borrowings under our
revolving credit facility and the issuance of additional equity or debt
securities. To the extent we issue additional partnership units to fund future
acquisitions or discretionary capital expenditures, the payments of
distributions on those additional units may increase the risk that we will be
unable to maintain or increase our per unit distribution level.

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Factors Affecting the Comparability of Our Financial Results
Our results of operations may not be comparable to our historical results of
operations for the reasons described below:
Revenues. There are differences in the way our Predecessor recorded revenues and
the way we record revenues. Prior to the Offering, our assets were part of the
integrated operations of Western and the Predecessor generally recognized only
the costs and did not record revenue associated with the transportation,
terminalling or storage services provided to Western on an intercompany basis.
Accordingly, the revenues in our Predecessor's historical consolidated financial
statements (which are our financial statements for periods prior to October 16,
2013) relate only to amounts received from third parties for these services and
minimum amounts required to be recorded for Western. We generate revenues
through the commercial agreements we entered into with Western at the closing of
the Offering and through existing third-party contracts. Under these commercial
agreements, Western pays us fees for gathering, transporting and storing crude
oil on our pipeline systems and storing and terminalling refined and other
products at our terminals. These contracts contain minimum volume commitments
and fees that are indexed for inflation in accordance with either the Federal
Energy Regulatory Commission ("FERC") indexing methodology for pipelines or the
U.S. Producer Price Index for all other fees.
Maintenance Costs. Our terminal facilities are subject to routine maintenance
for normal wear and related maintenance costs are generally consistent from
period to period. When a change in service of a storage tank occurs, maintenance
costs will generally be greater due to increased costs of tank cleaning and
hazardous material disposal. Our routine service cycle for tank inspections and
maintenance at our storage facilities is generally every 10 years. Our pipelines
are also subject to routine periodic inspections and maintenance. The cost of
our maintenance is dependent upon the level of repairs deemed necessary as a
result of the inspection of the specific asset.
General and Administrative Expenses. Our general and administrative expenses
included direct and indirect charges for the management and operation of our
logistics assets and certain expenses allocated by Western for general corporate
services, such as treasury, accounting and legal services. Prior to the
Offering, Western charged or allocated costs and expenses to the Predecessor
based on the nature of the services and our proportionate share of employee time
and headcount. Following the closing of the Offering, under our omnibus and
services agreements, Western charges us a combination of direct and allocated
charges for administrative and operational services that is comparable to those
charged to the Predecessor prior to the Offering.
Financing. There are differences in the way we finance our operations as
compared to the way our Predecessor financed its operations. Historically,
Western financed our Predecessor's operations as part of its integrated
operations and our Predecessor did not record any separate costs associated with
this financing. Additionally, we largely relied on internally generated cash
flows and capital contributions from Western to satisfy the Predecessor's
capital expenditure requirements. Based on the terms of our cash distribution
policy, we will distribute most of the cash generated by our operations to our
unitholders, including Western. As a result, we expect to fund future growth
capital expenditures primarily from a combination of the cash retained from the
Offering, borrowings under our revolving credit facility and the issuance of
additional equity or debt securities.
Delaware Basin System. The Predecessor's historical results of operations do not
include the Delaware Basin system that includes approximately 38 miles of
10-inch and 12-inch mainlines. These mainlines are located in Southeast
New Mexico and West Texas and handle crude oil produced in the Delaware Basin
area of the Permian Basin. The Main 12-inch and the East 10-inch pipelines were
placed into service in July 2013. The West 10-inch pipeline was placed into
service in August 2013. The Delaware Basin system is designed to handle up to
138,000 barrels per day ("bpd"), comprised of a mainline capacity of 100,000 bpd
and truck unloading capacity of 38,000 bpd.
Assets Retained by Western. The Predecessor's historical results of operations
include revenues, expenses and other items related to certain assets that were
retained by Western and not contributed to us in connection with the Offering.
These assets include Western's Jal NGL terminal and certain inactive portions of
the TexNew Mex 16" pipeline.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). In order to apply these principles, we must make
judgments, assumptions and estimates based on the best available information at
the time. Actual results may differ based on the continuing development of the
information utilized and subsequent events, some of which we may have little or
no control over. Our critical accounting policies could materially affect the
amounts recorded in our financial statements. Our critical accounting policies,
estimates and recent accounting pronouncements that potentially impact us are
discussed in detail under Part II, Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations in our 2013 Form 10-K.
Recent Accounting Pronouncements. From time to time, new accounting
pronouncements are issued by various standard setting bodies that may have an
impact on our accounting and reporting. We believe that recently issued
accounting pronouncements and other authoritative guidance for which the
effective date is in the future either will not have a significant

impact on our accounting or reporting or that such impact will not be material
to our financial position, results of operations and cash flows when
implemented.
The accounting provisions covering the recognition and reporting of revenues
were amended to remove inconsistencies in revenue requirements and to provide a
more complete framework for addressing revenue issues across a broad range of
industries and transaction types. The revised standard's core principle is that
a company should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. These
provisions are effective for the first interim or annual period beginning after
December 15, 2016, and are to be applied retrospectively, with early adoption
not permitted. We do not expect the adoption of this guidance to materially
affect our financial position, results of operations or cash flows.
How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our
performance. These metrics are significant factors in assessing our operating
results and profitability and include but are not limited to pipeline throughput
and terminal volumes, revenues, operating and maintenance expenses, EBITDA and
distributable cash flow.
Volumes. The amount of revenue we generate depends on the volumes of crude oil
and refined and other products that we handle with our pipeline and gathering
operations and our terminalling, transportation and storage assets. Primary
factors impacting these volumes include supply and demand for crude oil, refined
products and asphalt in the regions that we serve. Although Western has
committed to minimum volumes under our commercial agreements, we expect over
time that Western will ship volumes in excess of its minimum volume commitment
on our pipeline and gathering systems and will terminal volumes in excess of its
minimum volume commitments at our terminals. Our results of operations will be
impacted by whether Western ships and stores such incremental volumes and by the
amount of volumes we handle for third parties.
Revenues. We generate revenues from the commercial agreements that we entered
into with Western and other third­party contracts. Under the commercial
agreements with Western, Western pays us fees for gathering, transporting and
storing crude oil on our pipeline systems and storing and terminalling refined
and other products at our terminals. These contracts contain minimum volume
commitments and fees that are indexed for inflation in accordance with either
the FERC indexing methodology for pipelines or the U.S. Producer Price Index for
all other fees. The incremental volumes that Western and other third-parties
ship and store with us will directly impact our revenues and our results of
operations.
Operating and Maintenance Expenses. Our management seeks to maximize the
profitability of our operations by effectively managing operating and
maintenance expenses. These expenses primarily consist of labor expenses, lease
costs, utility costs, insurance premiums, repairs and maintenance expenses and
related property taxes. These expenses generally remain relatively stable across
broad ranges of throughput volumes but can fluctuate from period to period
depending on the mix of activities performed during that period and the timing
of such expenses. We intend to manage maintenance expenditures on our pipelines
and terminals by scheduling maintenance over time to avoid significant
variability and minimize impact on our cash flows.

Results of Operations

A discussion and analysis of the factors contributing to our results of
operations is presented below. The accompanying condensed consolidated financial
information for the three and six months ended June 30, 2013, represent our
Predecessor's results of operations, while the condensed consolidated financial
information for the three and six months ended June 30, 2014, represent the
results of operations for WNRL. The financial information, together with the
accompanying analysis, are intended to provide investors with a reasonable basis
for assessing our historical operations, but should not serve as the only
criteria for predicting our future performance.
We define EBITDA as earnings before interest expense and other financing costs,
provision for income taxes and depreciation and amortization. We define
Distributable Cash Flow as EBITDA plus the change in deferred revenues, less net
cash interest paid, income taxes paid and maintenance capital expenditures.
EBITDA has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of our results as reported under
GAAP. Some of these limitations are:
• EBITDA does not reflect our cash expenditures or future requirements for
capital expenditures or contractual commitments;

• EBITDA does not reflect the interest expense or the cash requirements
necessary to service interest or principal payments on our debt;

• EBITDA does not reflect changes in, or cash requirements for, our working
capital needs; and

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• EBITDA, as we calculate it, may differ from the EBITDA calculations of our
affiliates or other companies in our industry, thereby limiting its
usefulness as a comparative measure.

EBITDA and Distributable Cash Flow are used as supplemental financial measures
by management and by external users of our financial statements, such as
investors and commercial banks, to assess:
• our operating performance as compared to those of other companies in the
midstream energy industry, without regard to financial methods, historical
cost basis or capital structure;

• the ability of our assets to generate sufficient cash to make
distributions to our unitholders;

• our ability to incur and service debt and fund capital expenditures; and

• the viability of acquisitions and other capital expenditure projects and
the returns on investment of various investment opportunities.

Distributable Cash Flow is also a quantitative standard used by the investment
community with respect to publicly traded partnerships because the value of a
partnership unit is, in part, measured by its yield. Yield is based on the
amount of cash distributions a partnership can pay to a unitholder.
We believe that the presentation of these non-GAAP measures provides useful
information to investors in assessing our financial condition and results of
operations. The GAAP measure most directly comparable to EBITDA and
Distributable Cash Flow is net income (loss). These non-GAAP measures should not
be considered as alternatives to net income (loss) or any other measure of
financial performance presented in accordance with GAAP. EBITDA excludes some,
but not all, items that affect net income (loss). These non-GAAP measures may
vary from those of other companies. As a result, EBITDA and Distributable Cash
Flow as presented herein may not be comparable to similarly titled measures of
other companies.
The following tables summarize our financial data and key operating statistics
for the three and six months ended June 30, 2014 and 2013, respectively. The
following data should be read in conjunction with our condensed consolidated
financial statements and the notes thereto included elsewhere in this quarterly
report.
Three Months Ended June 30, 2014, Compared to the Three Months Ended June 30,

(1) Some barrels of crude oil in route to Western's Gallup Refinery are
transported on more than one of our mainlines. Mainline movements for the
Four Corners system include each barrel transported on each mainline.

Revenues. Prior to the Offering, our assets were a part of the integrated
operations of Western. The Predecessor generally recognized only the costs and
did not record revenues associated with the transportation, terminalling or
storage services provided to Western on an intercompany basis. Accordingly, the
revenues in the Predecessor's historical consolidated financial statements
relate only to amounts received from third parties for these services and
minimum amounts required to be recorded for Western for regulatory purposes.
Following the closing of the Offering, our revenues were generated by existing
third-party contracts and from commercial agreements with Western. The
commercial agreements with Western coupled with increased operations generated
from our Permian Basin assets resulted in significantly higher revenues
following the Offering.
Operating and Maintenance Expenses. The decrease in operating and maintenance
expenses resulted from a decrease in maintenance expenses ($1.7 million) that
was primarily the result of the timing of the performance of the maintenance
during the second quarter of 2014 versus the second quarter of 2013. Maintenance
expense for the three months ended June 30, 2014, was $8.6 million compared to
$10.2 million for the same period in 2013. The decrease was partially offset by
increases in energy and chemical costs ($1.1 million) and employee expenses
($0.4 million) related to increased headcount and wage rates for Western
employee services compared to 2013 primarily due to operating our Permian Basin
assets.
General and Administrative Expenses. General and administrative expenses
increased quarter over quarter due to an increase in professional and legal
services ($0.5 million) and public company costs ($0.3 million).
Depreciation and Amortization. Depreciation increased quarter over quarter due
to the ongoing expansion of our Delaware Basin logistics system.
Operating Income (Loss). Operating income increased quarter over quarter
primarily due to increased revenue, partially offset by higher general and
administrative expenses and depreciation and amortization.

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Six Months Ended June 30, 2014, Compared to the Six Months Ended June 30, 2013